Transfer Debt To A Card At Low Interest

New rules promote smarter use of credit cards

The government's new watchdog wants consumers to have a complete picture of a card's costs before they apply — including its exact interest rate and credit line. Currently those terms aren't determined until after an application is processed.

Having the information upfront will help borrowers make smarter choices, according to David Silberman, the assistant director for card markets for the new Consumer Financial Protection Bureau.

"When the costs and risks of a credit card are clear, consumers generally will make wise decisions about borrowing," said Silberman. He said letting people compare rates and credit limits before applying for a card would be a significant step toward that goal.

The CFPB can't prevent consumers from charging too much and it can't dictate the interest rates banks charge. But it's planning several changes aimed at helping consumers avoid fees and debt overload, simply by making the right information available, Silberman said.

In addition to the early disclosure of specific interest rates and credit lines, the agency is considering tweaking the summary of rates and fees that appears on marketing materials.

For example, balance transfer offers usually carry a one-time fee of about 4 percent. Yet the first line of the summary of terms lists the interest rate for balance transfers, which often is a promotional rate of 0 percent. The fee information appears several lines down.

The CFPB also is developing easier-to-understand legal disclosures for new card customers.

The changes would build on sweeping new regulations that went into effect last year.

Under the new rules, monthly statements must now state how long it would take to pay off debt if only minimum payments were made, and how much interest a borrower would pay over that period. Statements show how much borrowers need to pay to be debt-free within three years.

To understand the effect of the additional disclosures, officials are studying data from credit bureaus, academics and regulators that were produced for a conference marking the one-year anniversary of the new requirements.

So far, the additional information appears to be helping consumers.

A phone survey of 800 cardholders by market research firm Synovate found that about one-third of the respondents who noticed the changes to their bills, used their cards less or made larger payments. About the same number said the new rules make it easier to pay on time, according to the study, which was commissioned by the CFPB.

Interest Rates On Credit Card Balance Transfers

Single moms who are having a hard time paying off their credit card debt may be tempted to take advantage of the offers they receive in the mail that tout lower interest rates on balance transfers. Some offer a 0%  interest rate for a limited time.

Before rushing in to transfer your credit card debt to a new card, make sure you understand all of the terms of the transaction.

While the interest rate may be low during the introductory period, investigate the amount of the fee the credit card company will charge for a credit card balance transfer to the new card. The usual rate used by most companies is between 3 to 5 percent of the balance, but there is no cap on the amount of the fee.

If you are able to pay off the new credit card during the term of the introductory interest rate, and the fees charged are acceptable, credit card balance transfers may save you money. But, if there is any doubt about paying the new card off completely during the introductory time, make sure that you understand what interest rate you will be charged once the regular interest rate kicks in.

Interest rates on the original offer you receive in the mail will range, depending on your credit history. If the company deems that you have a good credit profile , you may qualify for a lower interest rate, but you will not know until you’re approved exactly what that rate will be.

Read the fine print to see what interest will be charged if you make a purchase on the credit card during the low interest introductory period. Even if you make a credit card balance transfer for a low rate, it doesn’t mean that the terms apply to new charges to the account.

The interest rate that is given when you are approved for the new credit card that you will transfer your credit balances to is not guaranteed if you make a late payment.

CardHub.com and Bankrate.com both offer online calculators that can help you decide if a  credit card balance transfer is in your best financial interest. The calculators will help you figure out if the amount you save in credit card interest is worth the fees you will pay. Make sure that you don’t make the mistake getting false information because you understate the duration of the debt. Use realistic expectations when entering the time you think you will need to pay off the balance of the new card to get accurate information.